THELaunched on 06/20/2013, the Invesco Global Short Term High Yield Bond ETF (PGHY) is a smart beta exchange traded fund offering broad exposure to the High-Yield / Junk Bond ETF category of the market.
What are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indices that are designed to represent the market or a particular segment of the market.
Market capitalization weighted indices are ideal for investors who believe in market efficiency. They offer an inexpensive, convenient, and transparent way to replicate market returns.
But, there are investors who prefer to invest in smart beta funds; these funds follow weighted no-cap strategies and are an attractive option for those who prefer to pick excellent stocks in order to beat the market.
Uncap-weighted indices try to pick stocks that have a better chance of risk-return, based on specific fundamental characteristics or a mixture of other such characteristics.
Methodologies such as equal weight, one of the simpler options, fundamental weight and volatility / momentum based weighting are all choices available to investors in this space, but not all of them can generate superior returns. .
Fund promoter and index
PGHY is managed by Invesco, and this fund has raised over $ 233.89 million making it one of the mid-sized ETFs among high yield / junk bond ETFs. This particular fund, before fees and expenses, seeks to match the performance of the DB Global Short Maturity High Yield Bond Index.
The DB Global Short Maturity High Yield Bond Index tracks lower quality short-term US and foreign bonds denominated in US dollars and is rebalanced quarterly and reweighted annually.
Cost and other expenses
For ETF investors, expense ratios are an important factor when examining the performance of a fund; in the long run, cheaper funds actually have the ability to outperform their more expensive cousins ââif all other things stay the same.
This ETF’s annual operating expense is 0.35%, making it one of the cheapest products in the space.
It has a 12-month dividend yield of 5.24%.
Sector exposure and main titles
ETFs offer diversified exposure and thus minimize the risk associated with individual stocks, but it is always important to delve into a fund’s holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
Regarding individual holdings, Invesco Government & Agency Portfolio (AGPXX) represents approximately 4.43% of total assets, followed by Exela Intermediate Llc / Exela Finance Inc-10.00% -7-15-2023 (AO1652368) and Easy Tactic Ltd-5.75% -1-13-2022 (AL9811616).
The top 10 holdings represent approximately 8.03% of total assets under management.
Return and risk
The ETF yield is around 0.80% and has increased by around 2.22% so far this year and over the past year (as of 7/12/2021), respectively. PGHY has traded between $ 21.34 and $ 22.25 in this last 52 week period.
PGHY has a beta of 0.27 and a standard deviation of 10.29% for the three-year period, making the fund a high-risk choice in the space. With around 462 participations, it effectively diversifies the risk specific to the company.
The Invesco Global Short Term High Yield Bond ETF is a reasonable option for investors looking to outperform the High-Yield / Junk Bond ETF segment of the market. However, there are other ETFs in the space that investors might consider.
The SPDR Bloomberg High Yield Bond ETF (JNK) tracks the Bloomberg Barclays High Yield Very Liquid Index and the iShares iBoxx High Yield Corporate Bond ETF (HYG) tracks the Markit iBoxx USD Liquid High Yield Index. SPDR Bloomberg High Yield Bond ETF has $ 8.79 billion in assets, iShares iBoxx High Yield Corporate Bond ETF has $ 18.30 billion. JNK has an expense ratio of 0.40% and HYG charges 0.48%.
Investors looking for cheaper and less risky options should consider traditional market capitalization weighted ETFs that aim to match the returns of high yield / junk bond ETFs.
To learn more about this and other ETFs, search for products that match your investment objectives, and read articles on the latest developments in the ETF investment universe, please visit Zacks ETF Center.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.